Consumers would still have choices for phone service, while competition in cable could force lower prices.

By Jessica Seid, CNNMoney.com staff writer

March 6, 2006: 4:29 PM EST

NEW YORK (CNNMoney.com) -
A day after AT&T announced a deal to acquire smaller rival BellSouth, many consumer groups are worried that less competition will lead to higher phone bills for consumers. But consumers will still have many choices for phone service, while a deal could boost competition -- and lower costs -- for Internet and other cable services.

Although long-distance rates have come down dramatically in the past two decades, from nearly 30 cents a minute in 1984 to as low as 2.5 cents a minute today, the fear is that the combined entity could use its heft to increase prices.

Together AT&T (Research) and BellSouth (Research) would hold 69.4 million telephone access lines and serve more than 30 million long-distance customers in states from Florida up to Michigan and out to Texas and California.

"This is definitely not good for competition," said Bill Hardekopf, CEO of SaveOnPhone.com, a long distance rates comparison site.

But with voice over Internet protocol (VoIP) gaining popularity and more consumers signing up for services that enable phone calls over the Web, bypassing traditional telephone networks, there are still a lot of choices.

"There are so many different options for consumers that didn't exist 20 years ago," Hardekopf said.

Jeff Kagan, a telecom industry analyst, says it is unlikely that there will be an impact on telephone rates. "People who want traditional phone service will pay what they are paying now."

Kagan further argues that under the new deal, AT&T will be better positioned to compete with the cable companies in the broadband Internet access market which is a "win for consumers."

"While long-distance rates have fallen, cable television providers have doubled or tripled their prices. With the phone companies getting into the (cable) business, that's going to put pressure on the cable industry," Kagan said, which will drive down prices.

Although AT&T has yet to roll out a bundled package of television, Internet and telephone services, it already has own VoIP phone service for broadband, called CallVantage.

After the merger closes AT&T will have 71 million access lines and 9.8 million broadband subscribers, more than the largest US cable provider Comcast (Research), which has 8.5 million cable modem subscribers.

That means the bell may be better positioned to compete against wireless providers and cable companies which could translate into more economical VoIP services among other offerings.